ADJ-00002795

ADJUDICATION OFFICER DECISION

Adjudication Decision Reference: ADJ-00002795

Complaint for Resolution:      

Date of Adjudication Hearing: 12/10/2016

Workplace Relations Commission Adjudication Officer: Pat Brady

Procedure: 

In accordance with Section 41(4) of the Workplace Relations Act, 2015 following the referral of the complaint) to me by the Director General, I inquired into the complaint and gave the parties an opportunity to be heard by me and to present to me any evidence relevant to the complaint

Attendance at Hearing: 

Adjudicator’s Note 

This is one of a number of complaints in a case related to an alleged breach of Transfer of Undertakings Regulations in which there are four respondents and two complaints in respect of each one. There is considerable overlap in the submissions of the parties.

For the purposes of clarity the respondent in this complaint is the transferor.

For convenience, while there were various legal entities operating the business at the centre of the case for convenience it will be referred to as ‘the company’.

The transferor was the original company, at that stage in receivership (ADJ 2795 and also 2796 although it is not clear how these complaints differ) and two transferees; an entity whose precise duration in charge is difficult to discern but which became the first transferee on December 12^th 2015 (ADJ 2785) and then a second transferee which was a new legal entity set up to continue the company’s business (ADJ 2798).

The net question in all these cases was whether the complainant had a right to transfer under the European Communities (Protection of Employees on the Transfer of Undertakings) Regulations 2003 by virtue of a transfer on December 12th 2015 and the status of the termination of his employment by reason of redundancy on October 29^th 2015  

Complainant’s Submission and Presentation: 

The company is a leading food producer and, at the time of the Complainant’s recruitment to the company, it had comprised two production facilities, together with a number of distribution depots.

The Complainant commenced employment on 1st February 2015, initially in the position of Sales and Business Development Director and assumed the position of Sales and Distribution Director in April 2015. His role was at a senior level, involved in all aspects of the business. His place of work was the company’s combined head office/depot facility in Dublin.

The terms of his employment with the company are contained in a contract of employment between the parties dated 1 February 2015 and they include a contractual notice term of three months’ duration.

The company went into Receivership on 11 June 2015, and a Receiver was appointed on 16 June 2015 with the objective to sell the business as a going concern.

The fact that a receiver has been appointed does not mean that a company is necessarily insolvent. While it is sometimes the case that the appointment of a receiver may be followed by a liquidation, the two processes are separate and distinct; unlike a liquidator, a receiver is not a Court appointment.

The appointment in this case was of a receiver/manager who would effect the sale of the business and, thus, ensure its continuation. The Receiver/Transferor, informed the Complainant that the company would continue to trade pending such a purchase and it was duly placed on the market by the Receiver/Transferor, as a going concern.

The business consisted of three sites and a number of depots nationwide and employed approximately 300 staff; around 90 of these in a regional depot which was eventually shut down, another which employed around 40 staff, including 14 sales staff and one member of senior management.

The Head Office and Depot employed about 35 staff, 5 of whom were senior management including the Complainant. A large number of van salesmen were based at depots throughout the country.

Of the approximately 300 employees, around 177 were within the Complainant’s sales and distribution function (165 van salesmen, 9 area managers and 3 Regional Sales Managers).

On 6 August 2015 the Receiver met with the Complainant and informed him that his position was being terminated by reason of redundancy. No ETO reason entailing a change in the workforce was given and the company was proposing to effect his dismissal with only one week’s notice, which was then extended to two weeks’ notice (due to annual leave entitlement of the claimant) despite his contractual entitlement to three months’ notice. The complainant was specifically told that no sale had yet been concluded in respect of the business.

The following day on 7 August 2015, a press release issued from the company, to the effect that the Receiver/Transferor had “successfully negotiated the sale of the majority of the [the company’s] assets and business to the first Transferee”.

The Complainant wrote to the Receiver/Transferor on 7 August to advise that it was his understanding that, as a member of the management team, his employment would transfer with the rest of the business.

The Receiver/Transferor responded on 18 August 2015 to the effect that his employment would not transfer as “the primary need to make immediate savings in the business as well as the planned closure of [other units of the] business. These two separate events make it even more difficult to justify the ongoing monthly cost of your role.”

No evidence or explanation of an ETO reason entailing a change in the workforce was put forward to the Complainant in this letter, instead he was told his role was redundant because financially it was the Receivers’ view he was too expensive and that he would not be transferring to the new purchaser.

The Complainant’s solicitors wrote to the Receiver/Transferor, on 20 August 2015 to note that the he was employed in the business, which was then anticipated to transfer to the First Transferee and that pursuant to the TUPE Regulations any dismissal by reason of the transfer would be unlawful.

Solicitors for the Receiver/Transferor responded on 21 August 2015 saying that;

“there is no present or future role for your client in the business that is being sold, and so there is no basis for him to transfer”.

There was no recognition of the Complainant’s legal right to transfer under TUPE in this letter or any explanation for the sudden lack of a need for a Sales and Distribution Director by the Receiver/Transferor, the First Transferee, to a nationwide business.

In light of the above, the Complainant successfully challenged in the High Court the termination of his employment on the basis of his entitlement to three months’ contractual notice.

It may be noted, a number of affidavits were furnished to the High Court by the receiver, in which it was stated that

“the portion of the Defendant’s business that is being acquired by the Purchaser will be subsumed into the Purchaser’s existing business and associated management structure”

and that, for this reason, the Transferee’s “unambiguous” position was that “it would not have a future need for a stand-alone management team or for certain management positions in the Defendant’s business post-completion”.

This explanation was not given to the Complainant in the meeting with him on 6 August 2015. In fact, he was told then he was being made redundant and there was no purchaser despite the fact that a Press Release was issued the very next day 7 August 2015 announcing the new purchaser.

Likewise it was not referred to in the letter of 18 August terminating the complainant’s employment, when he was told only that it was ‘difficult to justify the ongoing monthly cost of your role’, he was no longer required and his role was redundant.

No ETO reason entailing a change in the workforce was given and for the ETO defence to be available, the reason must relate to the day to day running of the business, it must be explained to the Complainant and it must entail a change in the workforce, it cannot just be the cost of the complainant’s salary.

It would also later transpire that, in fact, the company’s business would not be subsumed by the First Transferee and would in fact continue as a stand-alone entity, entirely retaining its identity, which is addressed further below.

The receiver asserted that he has the same rights as a liquidator to terminate employees without regard to the TUPE Regulations and that he could do so without adherence to a fair or any process and in breach of employees’ contractual entitlements, which is clearly incorrect and unlawful as set out in the extensive jurisprudence, by the ECJ, Irish Courts and Supreme Court in the UK.  

By letter dated 29 October 2015, the Receiver/Transferor, purported to terminate his employment in accordance with his three-month contractual notice entitlement.

The Complainant solicitors duly wrote to the Receiver/Transferor’s solicitors to advise them that, pursuant to the decision of the Supreme Court of England and Wales in Societe Generali v Geys [2013] I.R.L.R. 122 under common law, the general rule is that a repudiated contract is not terminated unless and until the repudiation is accepted by the innocent party. In this case, the termination would not take effect until 28 January 2016 upon the expiry of the Claimant’s notice and so the Claimant would remain an employee until that date.

In the meantime, on 4 November 2015, the Receiver/Transferor wrote to a colleague of the Claimant’s in the company’s head office to inform him that accordance with the TUPE Regulations the sale of part of the company business to the transferee had been agreed and that if “the sale of the business proceeds to completion, your employment will transfer to the Transferee…”.

This letter was sent to a senior executive contrary to claims made in the affidavit (for the High Court proceedings) of 7 September that senior executives would not be transferring.

The Complainant despite also being a senior executive, at no time received any such communication, either directly or via a representative, notwithstanding the fact that, as of the date of the letter, he was still an employee.

As it happened, a significant number of the senior management team did transfer. In addition the vast majority of 165 van salesman transferred as well as all 3 Regional Sales Managers and 9 Area Managers. The Complainant was by comparison targeted in advance of the legal transfer date in breach of his contractual, statutory and European law rights to have his employment protected, as other employees did, when the business that he was employed in transferred to a new employer.  

The First Transferee acquired the assets of the business via a newly incorporated vehicle, (the Second Transferee) which was incorporated on 11 November 2015. Rather than the company being “subsumed” into the First Transferee business, the Second Transferee commenced operations on 12 or 13 December 2015, trading with a similar name to the original company.

The Complainant’s solicitors wrote to the First Transferee on 11 December 2016, informing them of his entitlement to transfer to their employment. Solicitors for the First Transferee and the Second Transferee responded on 22 December 2015 to say that the Receiver/Transferor’s solicitors had informed them that the Complainant’s employment had been terminated on 29 October 2015 and, as he was not an employee on that date, he was not entitled to transfer.

The implication that the First Transferee was entirely unaware of the Complainant prior to receipt of his solicitors’ letter, entirely conflicts with the Receiver’s averments on affidavit that termination of the Claimant occurred because the transferor had unambiguously told them they did not want him to transfer.  

Respondent Submission 

The respondent did not attend. The first hearing was adjourned at the request of the complainant to request the respondent to attend but they did not do so.

Findings and Conclusions 

I have set out in very considerable detail the submissions of other respondents (the transferees) in Decisions ADJ 2785 and ADJ 2798. For obvious reason in the context of a transfer the narrative and legal submissions overlap although this respondent did not attend the hearing. The complainant sought an adjournment to require their attendance without success and a second hearing proceeded with out them in attendance.

The current respondent was therefore ‘in charge’ of the company between June 11^th 2015 and November 11^th 2015.

The following is an extract from that decision insofar as it is helpful to outline the background and that it is relevant to this case.

In the period 1^st January 2015 to 31^st July 2015, the company made a loss (before interest and depreciation) of €779,000. This did not include interest paid to a previous investor of €168,000 for that period. The business was operating at a significant loss at the time of the appointment of the Receivers, who were tasked with identifying savings in the business to keep it running while identifying prospective purchasers with a view, if possible, to selling the business as a going concern.

The Receivers owed a primary duty to the Debenture Holder, who appointed them and also had a number of duties under the Companies Act 2014, including an obligation to reduce the degree of the business's insolvency. The Receivers also had an obligation to exercise all reasonable care to obtain the best price reasonably obtainable when selling the property of a company in receivership. The Receivers concluded that getting the best price would require selling all or part of its business as a going concern.

By letter dated 26^th June 2015, prospective purchasers (including the first transferee) were invited to submit bids to acquire some or all of the assets and business of the company.

In order to ensure that all of the business could potentially be acquired as a going concern, the Receivers continued to operate all parts of the business (In Receivership) pending establishing the identity of prospective purchasers and those parts the business that a prospective purchaser was willing to purchase.

The alternative to selling the business as a going concern was that the business would be wound up involving the wholesale liquidation of the business with the loss of over 250 additional jobs.

The business had very limited resources to meet its liabilities and was in serious financial difficulty when the Receivers were appointed. In order to continue to operate the business as a going concern pending identification of a potential purchaser the Receivers identified an urgent need to create cost savings in the business. These included the severing of loss making business including some contracts with leading retail chains; reduction or elimination of sales promotion costs; as well as head count reduction by not replacing staff who left, and redundancies.

Amongst the cost saving measures identified were that the business did not have need for certain of the senior management roles including that of Business Development Director, (the Complainant) and that it was redundant. He was notified of this in a meeting on 6^th August 2015.  

The Receivers explained the business reasons for the selection of the Complainant's role for redundancy informing him that there was an urgent need for immediate cost savings in the business and that there was no requirement in the business for the Complainant's role now or in the future. A similar meeting was held with the other company directors on the same date.

From the time of the Receivers' appointment in June the Complainant had no role in the company. There was no work for him to do and no work that he could reasonably be assigned. The Receivers identified that the redundancy of the Complainant's role was one of the clearest cases of redundancy that one could ever come across in circumstances where there was no work for the Complainant to do as a consequence of the fact that the role he was hired to fulfil was predicated upon the company being economically viable and exploring growth opportunities which, by the time of the appointment of the Receivers, it manifestly was not.

Arising from the bid process initiated by the Receivers (the current respondent) on 26^th June 2015 the first transferee submitted the most attractive bid and that offer was accepted by the Receivers. However, it only wished to acquire part of the business.

A Business and Asset Purchase Agreement reflecting the terms of the purchase was entered into on 6^th August 2015. On 7^th August 2015, the Receivers announced the potential sale of part of the business to the first transferee subject to regulatory approval.

As the business was continuing to lose money the Receivers, who continued to have responsibility for the management of the business, had to take whatever steps were necessary to maintain it as a going concern which included making the Complainant redundant.

In a letter dated 7^th August 2015, the Complainant wrote to the Receivers objecting to the redundancy and noting that the notice period was other than in accordance with his contractual entitlements. In a letter dated 18^th August 2015, the Receivers confirmed to the Complainant the outcome of their meeting on 6^th August 2015 in relation to his proposed redundancy and confirmed that his role would be made redundant with effect from 22^nd August 2015. In that letter, the Receivers confirmed to the Complainant that he would receive payment in lieu of one week’s statutory notice entitlement, in addition to salary and benefits up to the final day of his employment.

In response to the Receivers letter dated 18^th August 2015, the Complainant’s solicitors wrote to the Receivers by letter dated 20^th August 2015 disputing the purported termination of the Complainant’s employment on grounds of redundancy and in breach of his contractual notice entitlements.

The sequence of events thereafter is largely as set out in the complainant’s submission.

By letter dated 29^th October 2015, the joint receiver manager on behalf of the company wrote to the Complainant and informed him of the termination of his employment. The Receivers terminated the Complainant’s employment on grounds of redundancy and confirmed that he would not be required to work out his three months’ notice but instead that he would be paid in lieu of notice in accordance with Clause 18 of his contract of employment.

The Complainant’s termination of employment took effect from 29^th October 2015.

The solicitors for the company replied by letter dated 5^th November 2015, clarifying the position in relation to the Complainant’s pay in lieu of notice.

By letter dated 11^th December 2015, the Complainant's solicitors wrote to the Respondent asserting that the Complainant had a right to transfer to the transferee pursuant to TUPE.

The Complainant's solicitors also asserted that the Complainant was, as of 11^th December 2015 still an employee of the transferor and on that basis was entitled to transfer to the employment of the Respondent.

The transfer of part of the business to the transferee took place on 12^th December 2015.

By letter dated 22^th December 2015, the Respondent’s solicitors wrote to the Complainant’s solicitors, noting that the Complainant had been made redundant on 29^th October 2015 and on that basis he was not an employee at the date of transfer of the business to the first named Respondent which took place on 12^th December 2015.

The Complainant issued his complaint to the Workplace Relations Commission on 15^th April 2016 naming both first and second transferees as having allegedly breached Regulations 5 and 8 of TUPE.

Conclusions and Findings 

The related issues arising are;

Did a transfer of undertaking take place and should the complainant have been eligible to transfer to the first transferee?

What was the status of his contract of employment at the time of the transfer on December 12th? Does the payment in lieu of notice foreshorten the expiry of notice?

Was the termination of his employment ‘by reason of the transfer’ and therefore an unlawful transfer.

Was there a breach of the notification requirements?

Does the Economic, Technical, Organisational defence, ‘ETO’ apply?

A transfer of undertakings occurs when ‘there is a changed legal identity of the person responsible for the management of the employees of a stable legal entity that retains its identity’

Per C-29/91 Redmond Stichtung v Bartol [1992] EUECJ C-29-91 ECR 1-3189 quoted in Employment Law in Ireland, Cox Corbett and Ryan, page 809

By the broad criteria set out there the ultimate outcome in this case was a transfer of a significant part of the original company which passed initially through the hands of the receiver, (two receivers, in fact) then to the first transferee and then to a second.

The key moment is the date of the transfer; that is the date on which the ‘entitlements and obligations of the transferor’ apply. That has been a significant issue in this case.

On the first occasion when the company sought to terminate the complainant’s employment, August 8^th 2015 the company announced, whether it was a coincidence or not, the proposed transfer the following day. In his evidence to the hearing the receiver said that while discussions were under way, including on August 8^th the deal was only reached later on that evening, at around 10pm.

On the second occasion when it gave notice, on October 29^th, and following the intervention of the High Court which required the terms of his contract to be honoured, and that he be given three months’ notice, the question arose as to what his precise employment status was on December 12^th when the transfer of undertakings is agreed to have happened.

The complainant has argued that because of the three months’ notice his contract of employment was still in force on the date of the transfer and therefore he should have transferred also. So the question that arises here is when the contract ended; at the end of the notice period, or on the date notice was given. The respondents in ADJ 2798 and 2785 (the transferees) have said that by his acceptance of the payment in lieu he accepted the termination of the contract on that day. He disputes this.

Likewise in those other cases a number of authorities were submitted to support the view that this was a genuine redundancy effected in advance of the transfer date and that this served to remove the obligation to transfer that employee as they are not in employment on the date of transfer.

They say that from an early stage the Receivers had identified that the Complainant's role was not necessary to the operations of the company in light of the financial position of the company and that it did not require the role of Business Development Director. This would then bring it within the definition of redundancy as set out in section 7(2) of the Redundancy Payments Acts.

In Purcell and McHugh v Bewley's Manufacturing Ltd. and Felwood Manufacturing Ltd. [1990] ELR 68 the claimants were made redundant by the first named respondent on 15^th July 1988 after the company ran into difficulties. The business operation was changed and the second named respondent was brought in on a subcontracting basis. The appellants claimed that there had been a transfer of undertakings and that they were protected by the provisions of article 3 of the 1980 Regulations.

The Employment Appeals Tribunal (EAT) held that a genuine redundancy situation existed and that the claimants were dismissed by reason of redundancy.

The claimants appealed and in dismissing the appeals Judge O'Malley held that the transfer was effected by two documents dated 18^th July and 1^st September 1988 which had been signed after the redundancies came into force and therefore the transfer, if it was a transfer, took place after the termination of the employment. He said there was no contract of employment or employment relationship existing.

The Judge was satisfied that:

“even if there was a transfer and they were in some way employed by Bewley's on that date, I am satisfied that the whole operation by Mr. Campbell was done for the purpose of shedding an uneconomic operation and saving money. He had difficulties with the workforce, which I cannot ignore, and settled these difficulties fairly. It was done for economic, technical and organisational reasons entailing changes in the workforce. He was losing 20,000 Irish pounds a month – it was essential to reorganise as far as the bakery was concerned. If the transfer was part of this operation and the dismissals were part of this, it was done for sound economic, technical and organisational reasons. Even if the appellants were within the regulations and the directive, that clause would take them out. However, I do not            think the regulations do apply because the appellants were made redundant.” The Judge concluded by saying “it was a genuine redundancy and their contracts terminated on 15^th July 1988.”

It was submitted by the respondent in the other cases that this case supports the contention that the Complainant's employment was terminated before the transfer was effected and that on that basis TUPE has no application or if TUPE does apply the redundancy was for sound economic, technical and/or organisational in circumstances where the company was substantially loss making and did not need the role occupied by the Complainant during the receivership process nor into the future and in those circumstances the Respondents have not acted in breach of TUPE, if it applies, which it is submitted it does not.

In Thompson v SCS Consulting and Open Text UK [2001] IRLR 801 receivers were appointed to the first named respondent's parent company in Canada on 21^st December 1998 and it was determined that the second named respondent would purchase the UK based business of the first named respondent.

Two days later the receivers designate for the UK business informed the prospective purchasers that they proposed to dismiss all of the employees immediately but the purchasing company (the second named respondent) did not want to lose vital employees so it was agreed that the appointment of the receivers would be delayed until 29^th December by which date the second named respondent would identify the employees it wished to retain for the future operation of the business.

The agreement provided that before the sale and purchase agreement took effect the receivers would dismiss the remaining employees at the request of the purchaser as a precondition to the purchaser entering into this agreement on the grounds that they are not required for the operation of the business and that it would not be economically viable for the business to continue if the dismissed employees remained in the employ of the vendors.

The complainant was not included in the list of employees to remain and was dismissed along with 24 other employees at 11.30am on 29^th December 1998. The business transferred to the second named respondent at 10.30pm on that same date (11 hours later). An Employment Tribunal (ET) found that the dismissal was for an ETO reason and therefore the employee was not to be treated as automatically unfairly dismissed for a reason connected with the transfer.

The claimant appealed and in dismissing the appeal the EAT found that it was

“open   to the tribunal to conclude on the facts, as they did that the business was overstaffed, inefficient and insolvent, and that the only way in which it could be made viable for the future and continued as a going concern was for the workforce to be reduced in size.”

The findings of fact by the ET that this was not a case of collusion and that left to their own devices the receiver would have dismissed all the employees were not challenged.

The EAT held that:

“on the basis of the primary facts it was for the tribunal to reach a factual conclusion as to whether the reason or principal reason for the dismissal of the claimant was an ETO reason; it was open to the tribunal to decide that it was; the tribunal applied the right tests and the correct principles; and (if and in so far as there was an implicit suggestion of perversity) we see no basis on which it could be concluded that the tribunal's conclusion was perverse.”

In Page and Fawdington v Lakeside Collection Ltd. trading as Lavender Hotels and Prime Resorts Ltd (In Administrative Receivership) Appeal No UK EAT/0296/10/SM an Employment Tribunal's finding that claimant directors/employees' employment was not transferred was upheld by the UKEAT.

The claimants worked for the second named respondent in a hotel which suffered in the economic downturn such that in September 2008 its bankers had a review of the business conducted and a sale of the business was proposed.

The first named respondent proposed to purchase it in or around end January and compromise agreements were drafted on 27^th/28^th January 2009 in respect of three directors (the claimants and a Mr. Leader) with a view (as inferred by the ET) to removing the directors from the business, which business was potentially being transferred to the first named respondent.

The sale fell through on 30^th January 2009 and administrative receivers were appointed effective 3^rd February 2009. The claimants were dismissed by the receivers on 3^rd February and confirmed by letter. On 13^th February 2009 the first named respondent offered to purchase the hotel and the sale of same was completed on 10^th March 2009.

The ET held that the reason for the dismissal was not the ultimate transfer to the first named respondent but an economic, technical or organisational reason entailing changes in the workforce. The claimants were redundant because fewer managerial staff were required during the period of the administration.

The EAT found that the ET accepted that following the collapse of the initial sale on 30^th January the receiver decided to retain Mr. Leader as his knowledge would assist the receivers in trading the hotel until it could be sold but the claimants were unnecessary for that purpose and were therefore dismissed as part of his reorganisation of the business. The transfer (including the transfer of Mr. Leader) had taken place on 10^th March 2009 and the claimants had already been dismissed for over a month by then. The EAT upheld the finding of the ET and dismissed the appeal.

In Kavanagh and others v Crystal Palace FC Limited and CPFC 2010 Limited [2013] EWCA Civ 1410 the claimants were employed by the first named respondent when both the club and the stadium ran into difficulty resulting in administrators being called in. A buyer was identified who wanted to purchase both the club and the stadium but during negotiations for the sale of the club problems arose relating to the purchase of the stadium.

A purchase agreement for the club was executed but held pending sale of the stadium. A few days later the administrator made several people, including the claimants, redundant to save money with a view to mothballing the club but the following week the buyer bought the stadium along with the club. The claimants brought proceedings alleging unfair dismissal in the context of TUPE.

The ET found that the reason for the dismissal was not the transfer itself but rather was a reason connected with the transfer, i.e. that the club could not afford to pay all its employees) and that the need to reduce the wage bill was an ETO reason that could be distinguished from the administrator's ultimate objective of selling the business as a going concern. Accordingly because there was an ETO reason for the dismissal the claimants had not been unfairly dismissed.

The EAT allowed the appeal by the claimants and found that the ET had erred in finding that the dismissals were for an ETO reason. In their view the administrator had not intended to carry on the business but rather to maintain it so it could be sold as a going concern. The EAT found that the reason for the dismissals was for the purpose of selling the business.

In the Court of Appeal Kay L J noted that this case was concerned with the interaction of the TUPE regulations and the regime governing the administration of companies in financial difficulty.   The Court of Appeal placed emphasis on the unique financial features of a failing football club.

They recognised that the club's most valuable assets were its contracted players, therefore the liquidation was unlikely to satisfy its creditors. Accordingly, the Court held that there were “stronger reasons than usual” for avoiding liquidation. Kay LJ accepted that the administrator, in dismissing the claimants, did so in an effort to reduce the club's wage bill and increase its chances of avoiding liquidation.

The Court of Appeal held that the necessity of reducing the wage bill in order to avoid liquidation constituted an ETO reason, whereas reducing the workforce to make the business more attractive to a prospective purchaser was not. The appeal was allowed and the judgment of the ET restored.

In the Complainant's case, similar to the Page and Crystal Palace cases, the Receivers had concluded that to manage the business as a going concern there was a need to reduce costs and they had identified that there was no current or ongoing need for the role of Business Development Director and that the Complainant in that role should be made redundant. It is submitted that it is entirely open for the Receivers to reach that conclusion and the Respondents submit that in the circumstances the ground for the Complainant's dismissal was redundancy and not the potential transfer.

The Respondent also says that in so far as TUPE applies, (which it submits it does not), the necessity for the business to cut its costs to survive, pending sale (and after sale), is sufficient to justify the Complainant's termination on ETO grounds.

The Respondent (in this case) from Cunningham and O'Connor v Oasis Stores Ltd. [1995] ELR 183 that the criteria for redundancy are the same as applied by the EAT in this jurisdiction for determining if ETO reasons apply. In that case, the claimants were senior executives responsible for the management of the retail clothes business run by a succession of companies. When four of the shops in the business were sold to the respondent company the claimants were not engaged. They brought a claim under TUPE that the failure of the respondent to employ them was unfair dismissal.

The EAT concluded that:

“There was no need for a chief executive or area manager because of the organisation change in the way the four shops were managed. In a sense the two claimants were redundant in that the requirements in Dublin for employees in their kind of work had ceased or dismissed. Dismissal for economic, technical or organisational reasons is permitted by the Directive. We therefore disallow the claims.”

The respondent says that since the transfer the first transferee dismissed a number of employees on ETO grounds as the number of depots required to operate the business has reduced from 23 to 15 and the management structure within the first transferee is entirely different to that which operated within the pre transfer situation with shared senior management functions.

The respondent saw no requirement for the Complainant's role in the future and so for economic, technical and organisational reasons the dismissal of the Complainant was justified.

I accept that on the authority of Purcell and McHugh v Bewley's Manufacturing Limited and the Oasis Stores case this was a redundancy situation and sufficient to meet the criteria of an ETO defence.

So on the above authorities I find as follows.

I find that a transfer of undertakings did take place on December 12^th 2015. Three of the authorities submitted on behalf of the complainant addressed this question and the fact that the Regulation applies even in a situation of a liquidation, for example.

I find that the selection of the complainant for redundancy was, on balance made independently of the decision to transfer, or put another way that independent grounds existed to do so. I say on balance because two things were clear; one that the receivers had decided that the complainant’s salary was a significant drain on a company in dire financial straits and that they had an obligation to reduce costs. The company was, at that stage, according to the direct evidence of the receiver losing €50,000 per week.

They also said that they did not see an ongoing role for him in the company and that the previous receiver (who had only been in place for a few days from June 11th) had ‘flagged’ the fact that the management layer above the complainant was ‘identified as having no contribution to make’. In the event the complainant was the only member of the senior management team to be made redundant before the transfer (with the exception of one of the company’s depots which closed).

Of course they had an eye from the time of their appointment (in June 2015) on securing a buyer for the company and this was a high priority. Nonetheless it seems clear that the conclusions reached about this layer of management were sufficiently detached from any proposed transfer.

Regulation 5.1 is clear in stating that the transfer shall not ‘in itself’ constitute grounds for dismissal.

There is sufficient evidence, that while acknowledging that discussions on the transfer were going on in parallel to the decision to terminate the complainant the decision to do so seems to have been made primarily on its business merits. I find insufficient evidence to conclude that the transfer was ‘in itself, or even substantially the reason for the transfer.

This question might also be put another way. If, for some reason a transfer had not been effected and the company had in some way managed to retain an independent identity would the complainant have been retained? I am satisfied that he would not have been.

It is worth referring again to the dicta above of O’Malley J. Purcell and McHugh v Bewley's Manufacturing Ltd. and Felwood Manufacturing Ltd where he stated the criterion as being ‘whether the reason or principal reason for the dismissal of the claimant was an ETO reason.

The complainant submitted that for the ETO Defence to apply,

‘there must be a genuine need to dismiss i.e. in effect that a redundancy arose and objective justification for there being the existence of such reasons which entails a change in the workforce. The Respondents’ have all failed to prove an ETO reason entailing a change in the workforce existed. In the letter of 18 August 2015 from the Receiver/Transferor, KPMG to the Claimant it was stated that his employment would not transfer as “the primary need to make immediate savings in the business as well as the planned closure of [two locations]. These two separate events make it even more difficult to justify the ongoing monthly cost of your role.”

They further submitted that

‘It is not simply acceptable that there was a cost factor, or that the Claimant was too expensive, or that there was a redundancy, which has not been evidenced. An ETO entailing a change in the workforce must be clear and there must be good evidence, which generally is easier to establish post transfer of a business, when the new employer would review all of its operations in conjunction with the incoming staff and there would be clear evidence of change. There was no such need in this case and no evidence was presented or explained to the Claimant. [the transferor] was continuing to trade when Receiver/Transferor first attempted to dismiss the Claimant.

I am at a loss to understand this.

I find that the general work of the receivers falls well within the ETO defence. The complainant submitted that for the ETO defence to apply ‘there must be genuine need to dismiss’ i.e. in effect that a redundancy arose and objective justification must exist which entails a change in the workforce.

Whatever may have been contemplated in relation to the future ownership of the company, and despite ‘continuing to trade’, a business losing €50,000 per week surely has sound reasons to effect changes in its workforce. As noted above the complainant was told by letter of August 18^th 2015 that he would not transfer because of the ‘primary need to make immediate savings in the business as well as the planned closure [of two depots].

I rely here on the dicta cited above of O’Malley J in Purcell and McHugh v Bewleys where the learned judge noted ‘that the whole operation by Mr. Campbell was done for the purpose of shedding an uneconomic operation and saving money’.

As to the question of notice and the effective date of termination the following appears in the complainant’s contract of employment at Clause 18, in relation to Notice of Termination;

“Except in circumstances justifying summary termination or termination consequent on the application of formal disciplinary procedure, the employee will be entitled to receive three months' written notice of the termination of his employment. Such termination of employment will be deemed to be a “no fault” termination. The Company reserves the right to pay the Employee's remuneration in lieu of notice or continue payment during the notice period, while relieving the Employee of any or all of his duties and responsibilities during the notice period.”

So the question is whether the date of termination was October 29^th, 2015 the date on which the complainant was given notice, or as he submits, three months later on the date on which notice if served out would have expired. If the former then he would have been an employee on December 12^th, the date of the transfer and if not, he would not have been as his termination would have taken effect.

The late Dr Mary Redmond has addressed this issue in ‘Dismissal Law in Ireland’, at paragraph 21.77 where the following appears.

‘If a contract lays down a notice period, it will technically be a breach of contract to give pay in lieu of notice unless this right is reserved to the employer. If it is, and an employee accepts payment of wages in lieu of notice, the date of dismissal will be the date on which termination takes effect, as the contract will have been determined in accordance with its terms. If there is no right to give pay in lieu of notice in the contract, the EAT will treat the case as a no notice one and will add on the contractual or statutory notice which ever is the greater

Both pre-conditions referred to by Dr Redmond were present in this case; it will be seen from the contract above that there was a right to pay on lieu of notice and the complainant accepted this payment.

I find therefore that the contract of employment terminated on October 29^th 2015 and that the complainant was not, at the time of the transfer an employee of the transferor. He was not therefore eligible to transfer under the Regulations nor does the notice or consultation requirement apply.

Decision:

Section 41(4) of the Workplace Relations Act 2015 requires that I make a decision in relation to the complaints in accordance with the relevant redress provisions under Schedule 6 of that Act.

For the reasons fully set out above I do not uphold complaints CA-00003758-001 and CA-00003758-003 and the complaints are dismissed.

Dated: 05 April 2017